Inside Target's Digital Revolution

Target has been in the news a lot recently, and not always for the right reasons. First there was the massive data breach in December 2013, and more recently a website outage on the night of the much anticipated launch of the Lilly Pulitzer line at Target. It's not been all bad news, however. Target's e-commerce business is growing substantially. In last year's fourth quarter, digital sales at Target rose 40 percent. Furthermore, Target said it would spend $1 billion this fiscal year on digital initiatives, and forecasts that its e-commerce sales will increase 40 percent year-over-year.

At the Internet Retailer Conference & Exhibition (IRCE) in Chicago yesterday, Jason Goldberger, president, Target.com and mobile, discussed the big-box retailer's digital strategy during his keynote address. Goldberger touched on the Lilly Pulitzer fiasco, as well as three universal truths that all online retailers are dealing with.

‘Pink Sunday’ Gone Bad
Goldberger and his team were calling the Lilly Pulitzer launch “Pink Sunday,” equating the mass of shoppers expected for the one-time event to what Target typically sees on Black Friday. Target knew that the limited, 250-piece Lilly Pulitzer designer collection was going to sell out, the question was just how fast. What happened landed Target in the middle of a firestorm.

The morning of the launch, Sun., April 19, Target.com stopped working — and Goldberger and his team couldn’t figure out why. Panic set in as customers’ anger grew. “We were totally paralyzed,” Goldberger recalled. Twitter and Facebook were ablaze with criticism of the retailer.

After several agonizing hours, Target was able to identify its mobile app as the problem. The volume of customers trying to make purchases via the app was impacting all of Target’s sites. The retailer shut down its app and got its site up and running again, but the damage had already been done.

Goldberger conceded the launch was a big disappointment, and that Target’s guests had a reason to be upset.

You can only test so much, and we didn’t expect or prepare for the volume of guests that would use our app to transact, Goldberger said in retrospect. Furthermore, Goldberger and his team relied on data that was “just six months old,” but proved not to be accurate in today’s rapidly evolving retail environment.

Seguing from Target’s very public failure on the Lilly Pulitzer launch, Goldberger introduced what he believes are three universal truths that all online retailers are still working to overcome:

1. You need to be guest obsessed, not channel obsessed. Customers don’t care how or where they interact with your brand; they want a seamless experience regardless. While predicting the future may be the ultimate act of hubris, one thing Goldberger does feel confident in saying is that technology will continue to change the way consumers shop. And while Target’s brick-and-mortar stores will most certainly still exist, they may look different. A couple of trends driving that evolution:

in 2017, millennials will become Target’s No. 1 demographic, surpassing baby boomers; and

98 percent of Target’s customers shop digitally in some way, shape or form.

“Investing in mobile will help us grow all channels,” Goldberger said, adding that digital engagement creates additional store trips and purchases. With that in mind, Target has adopted a mobile-first approach for its marketing efforts.

2. Reinvent assets. The best way to lose is to not use your most valuable assets. For Target, its most valuable asset is its nationwide brick-and-mortar store infrastructure. Target.com won’t beat Amazon.com, but Target will, Goldberger boldly declared. The big-box retailer is reinventing how its stores are used and operated, from ship from store to buy online, pick up in-store to next-day delivery of online orders. Goldberger noted that 90 percent of the country is within a one-day to two-day delivery window for Target.

3. Say yes. It might sound simplistic, but this is a mantra all retailers should live by, Goldberger said. If a customer wants something, say yes, even if may come with some short-term pain. The payoff in the long run is worth it.

Goldberger cited two examples of Target saying yes to its customers. The first was offering free shipping on all holiday purchases last year. While Goldberger admitted that the retailer saw its margins go down because of this move, it did convert more happy customers who are likely to come back and buy again.

Second, Target implemented Wi-Fi in its stores six years ago, appeasing “showrooming” guests despite internal concerns. The retailer’s fears that customers would use Wi-Fi to look up in-store items on their mobile devices and make purchases online elsewhere (primarily Amazon) were unfounded, however. In fact, the No. 1 website accessed in Target stores — and by a wide margin — is Target.com, Goldberger said.

Goldberger closed his presentation with a word of advice for the retailers in the audience: Embrace change. That will be the key to their future success.